Corporate governance can be defined as a vehicle of decision-making and power allocation among shareholders, managers and obligee. Comparing with the minority shareholders, the institutional shareholder has more advantages of participating in the corporate governance. This article discusses the institutional shareholder's enhancement of corporate governance. It explores from the classifications of institutional shareholders, and ”OECD Principles of Corporate Governance”. Furthermore, it discusses the correlation between corporate governance and corporate performance. At last, it concludes that good corporate governance certainly helps protect shareholder interests, and can help contribute to superior long-term economic performance.